A process engineer is considering two options for a new product line. One of the options must be chosen. • To make a unit in-house, equipment costing $250,000 must be purchased. It will have a life of 4 years, annual operating costs of $80,000, and a salvage value of $95,000. Each unit will also cost $40 to manufacture. Buying the unit externally will cost $100 per unit. The company's MARR is 12% per year. a. If the anticipated volume is 2000 units per year, what is the annual equivalent cost for making the item in-house? [Select] b. If the anticipated v [Select] $222,430 [Select] $142,430 $182,430 $202,430 $262,430 e engineer should

A process engineer is considering two options for a new product line. One of the options must be chosen. • To make a unit in-house, equipment costing $250,000 must be purchased. It will have a life of 4 years, annual operating costs of $80,000, and a salvage value of $95,000. Each unit will also cost $40 to manufacture. Buying the unit externally will cost $100 per unit. The company's MARR is 12% per year. a. If the anticipated volume is 2000 units per year, what is the annual equivalent cost for making the item in-house? [Select] b. If the anticipated v [Select] $222,430 [Select] $142,430 $182,430 $202,430 $262,430 e engineer should

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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New microelectronics testing equipment was purchased 2years ago by Mytesmall Industries at a cost of $600,000. Atthat time, it was expected to be used for 5 years and thentraded or sold for its salvage value of $75,000. Expandedbusiness in newly developed international markets is forcingthe decision to trade now for a new unit at a cost of$800,000. The current equipment could be retained, ifnecessary, for another 2 years, at which time it would have a$5000 estimated market value. The current unit is appraisedat $350,000 on the international market, and if it is used foranother 2 years, it will have M&O costs (exclusive ofoperator costs) of $125,000 per year. Determine the valuesof P, n, S, and AOC for this defender if a replacementanalysis were performed today. P = market value =$350,000AOC = $125,000 per yearn = 2 yearsS = $5,000
A computer set cost of P56,000. Other expenses including installation of anti-virus amounted to P4,000.00. The set predicted to have a life of 16 years with a salvage value of 10% of the original cost. Determine the book value at the end of 12 years by SLM. a. 12,879 b. 21,907 c. 19,500 d. 22,850
The management of Brawn Engineering is considering three alternatives to satisfy an OSHA requirement for safety gates in the machine shop. Each gate will completely satisfy the requirement, so no combinations need to be considered. The first costs, operating costs, and salvage values over a 5-year planning horizon are shown below. End of Year Gate 1 Gate 2 Gate 3 0 -$15,000 -$19,000 -$24,000 1 -$6,500 -$5,600 -$4,000 2 -$6,500 -$5,600 -$4,000 3 -$6,500 -$5,600 -$4,000 4 -$6,500 -$5,600 -$4,000 5 -$6,500 + $0 -$5,600 + $2,000 -$4,000 + $5,000 What is the future worth of each alternative?
Guardian is a national manufacturing company of home health care appliances. It is faced with amake-or-buy decision: a newly engineered lift can be installed in a car trunk to raise and lower awheelchair.Buy: The steel arm of the lift can be purchased for $0.60 per unit or make in house.Make: If manufactured on site, two machines will be required. Machine A is estimated to cost$18,000, have a life of 6 years, and a $2,000 salvage value. Machine B will cost $12,000, have a life of4 years, and a $-500 salvage value (carry-away cost). In addition, machine A will require anoverhaul after 3 years costing $3,000. The AOC for A is expected to be $6,000 per year and for B$5,000 per year. A total four operators will be required for the two machines at a rate of $12.50 perhour per operator. 1,000 units will be manufactured in a normal 8-hour period.Use MARR=15% to find the number of units to be manufacture each year
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Bell’s Amusements purchased an expensive ride for their theme and amusement park situated within a city-owned Expo Center. Bell’s had a multiyear contract with Expo Center. The ride cost $1.35 million, installed. Gross income from the ride was $420,000 per year, with operating expenses of $120,000. Bell’s anticipated that the ride would have a useful life of 12 years, after which the net salvage value would be $0. After 4 years, the city and Bell’s were unable to come to an agreement regarding an extended contract. In order to expedite Bell’s departure, Expo Center agreed to purchase the ride and leave it in place. Right at the end of the 4th fiscal year, Expo Center paid to Bell’s the $900,000 unrecovered investment based on using straight-line depreciation. Corporate income-tax rate is 25% and the after-tax MARR is 9%. Develop tables using a spreadsheet to determine the ATCF for each year and the after-tax PW, AW, IRR, and ERR after 4 years. Use MACRS-GDS and state the appropriate…
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A drug store is looking into the possibility of installing a 24/7-automated refill system to increase its projected revenues by ₱800,000 per year over the next 5 years. Annual expenses to maintain the system are expected to be ₱200,000. The system will cost ₱2,000,000 and will have no market value at the end of the 5-year study period. The store’s MARR is 20% per year. Using the AW (annual worth) method, it can be concluded that this is not a good investment. True or False? Why?
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